Scarcity and abundance 101
Even in the current global downturn, most of us are better off than our parents and grandparents. People are living longer, healthier lives, and have more choices than ever before.
This past weekend we were in Las Vegas and went to Cirque du Soleil for their 'Beatles Love' program. The Mirage was crowded and the auditorium was packed. Where was the 'recession'?
Food is cheap and abundant; yet some people pay $10 for 'special' organic lettuce. MIT offers all its courses for free online; yet students attend classes paying annual fees over $36 000 (plus dorm expenses and books).
These paradoxes make sense when we consider how markets work, and redefine what is being bought and sold. Midst the abundance of choices, we buy 'scarcities' – the things we really want.
In the case of the live show, it was the sense of authentic connection. Before and after the show, people were buying expensive books, DVDs and T-shirts to capture the memories of BEing there. Going to MIT – BEing there – cannot be replaced by any on-line course.
The technology guru George Gilder has long postulated: “Every economic era is based on key abundances and scarcities.”
Every new abundance brings matching scarcities, and many of our problems are centred on these recurring anomalies. Our current 'scarcities' offer opportunities.
Markets create abundance by identifying needs, determining prices and allocating goods. Markets thrive on scarcity, and turn it into abundance. Wealth is generated when something is scarce and can be offered at a high premium over cost.
In the midst of a seemingly abundant choice of cellphones, Apple broke into the market to gain a leadership position fairly quickly. They did not offer what was already abundant – lots of cellphones with slightly different features. They offered the real value which people wanted, and were ready to buy at a premium.
Case study
In my article ‘Future of TV’ (eNews 12 May 2009) we discussed mobile-phones becoming the primary Internet connection, replacing TV and desktop computers. It is clear that what is needed is NOT just the commodity connection product, but the software environment that provides special value.
From this standpoint, Apple is not an iPod (music-player) company, nor a smartphone company (iPhone). It is not even a computer company – MAC hardware is relatively mundane.
In the midst of commodity products and markets Apple is morphing into a serious software giant. The iPhone OS 3.0 software update released this month for the iPhone and iPod Touch is probably the most important technology event of the past few years.
Sure, the latest iPhones are good phones; but they are like most other phones – capable and easy-to-use multitools for the connected age. They not only make phone calls, they check your e-mail, browse the Internet and take a decent picture. And they have games and GPS. Most of the competitors do too. Heck, if all you need is a good phone, buy the new Palm Pre which was designed by an ex-Apple genius.
The real iPhone breakthrough is the software it unlocks for developers of third-party applications. It becomes not just a cellphone, but a computing platform. The AppStore is now packed with more than 50 000 iPhone applications. There are apps for working out, for around the house, for going out, for making money.
Many iPhone applications are 'free' downloads – software developers make money by selling subscriptions for add-ons and premium content.
The software is the 'scarcity' – no one else has the capability yet. By the time they catch up, Apple will be locked in as 'the standard'.
It remains to be seen how the other cellphone companies will react. Early leaders (Motorola, Eriksson) are falling behind by just offering hardware and proprietary software. Apple’s marketing genius comes from offering a complete development environment for third-party developers.
Change your offering
Is your company affected by the recession? Are people simply not buying your products because of a budgetary crunch? This may be because you are selling 'commodities' – abundantly available stuff. The secret is to sell 'scarcity' – something in demand, which your customers MUST buy.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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